Property investors continue to dominate the housing market and for agents looking to specialise in this lucrative sector, there’s a new secret to getting more listings. Andrea Cornish reveals the secret and how you can tap into success.
The top reasons given for the continuing capital growth in the market were housing shortages, low interest rates, foreign investment and speculative fervour.
There’s a difference between fads and trends. Fads are flash in the pan – neon t-shirts, the Segway, frosted tips for men. Trends have longevity and a pattern of rise and fall in popularity – merlots, being a stay-at-home mother, wearing anything black.
But even trends rarely manage to capture the public’s imagination for long, which makes it all the more astonishing that the majority of Australians continue to pin their hopes for financial freedom on property investment – named the top investment strategy for the past ten years.
In terms of housing market trends, first-home buyers are so 2008. “Since the pullback of the government’s First Home Buyers scheme, property investors have picked up the baton and started to run.”
According to the country’s largest mortgage aggregator, property investors are dominating the housing market. The AFG Mortgage Index found 36.7% of all mortgages arranged in May were for investors, compared to 15.4% for upgraders and just 9.9% for first-home buyers.
Overall loans to investors were up by an annual 26% in the March quarter of this year, reported BIS Shrapnel. “Even though overseas migration inflows are steadily easing, a deficiency of stock is still in place with dwelling construction below underlying demand,” said Angie Zigomanis, BIS Shrapnel senior project manager. “This is expected to put pressure on vacancy rates and result in stronger rental growth later in 2010. The deficiency of dwellings, and improved rental picture, will continue to maintain investor demand and assist prices.”
And investors show little sign of backing down. The Investor Pulse survey released at the end of March revealed that 60% of property investors believe Australia is in the midst of a property bubble. Despite that, 67% still thought now was a good time to buy an investment property – believing tight supply would continue to underpin strong growth and yields. The top reasons given for the continuing capital growth in the market were housing shortages, low interest rates, foreign investment and speculative fervour.
And rates, at least in the short term, appear to be on hold. After six rate rises between October 2009 and May, the Reserve Bank of Australia paused at 4.5% in June as it gauged the global recovery. Economists are predicting the RBA will continue to take a more measured approach in future policy meetings.
The current round of interest rate rises is expected to have run its course, with further rises expected to be more moderate, said Ms Zigomanis. “Our forecast is for the cash rate to increase by 50 basis points in 2010/11, and a further 50 basis points in 2011/12. The more stable interest rate environment is expected to underpin purchaser confidence as economic conditions continue to strengthen, and should continue to push through moderate house prices rises.
When it comes to uncertainty over rates, AFG’s general manager of sales and operations Mark Hewitt said investors are better placed than other homebuyers. “Every month we go through this ‘will they or won’t they?’ raise interest rates debate. It’s hard for ordinary families to make the huge financial decision to buy a property when they don’t know what repayments will be in three months time, let alone next year. Investors are somewhat more insulated. They may have the option of rent rises or negative gearing to protect them. This is why we’re seeing the emergence of a two-tier mortgage market.
How to reach investors
Steve Hay Real Estate’s Kris Sutcliffe says there is a high level of investment activity in his area. “Generally enquiry from investors has always been strong, but many property investors waited for the first home buyers to leave the market and now they have really taken over.
Sutcliffe recently found a new way to get listings and reach this target group. Sutcliffe used realinvestmentproperty.com.au (Real IP) to secure a 43-unit development project in Caboolture’s CBD.
Once the benefits and features of the Real IP website were explained to [the vendor], they could see the benefit of being involved with an agent utilising the system and listed their project exclusively with our office,he said. According to Sutcliffe, this generated more than $350,000 in commissions. He adds,Enquiry received has been genuine and I have found buyers qualify themselves with the information advertised online. Investors are well equipped and know the rate of return before even picking up the phone.
Realinvestmentproperty.com.au has set itself apart from other websites by focusing solely on property investors. It also is the only housing website which lets buyers search for an investment property by a percentage return.
Agents and buyers describe the site as an incredibly powerful research tool. Not only does it shortlist properties according to the buyers’ needs, it does so instantly. Properties have to return at least 4%+ rental yield before they are even eligible to be listed on the site, which means it only features the top performing investment properties in Australia.
Buyers can create a shortlist in seconds. Typically doing this type of search using traditional methods takes weeks or months, but using the site takes seconds. All the user has to do is type in the area they want to search, the price range, number of bedrooms/bathrooms and the rate of return.
Once the shortlist is compiled, the user can select the property and see the price, the gross rent per week, what the agency charges as the management fee per annum, the percentage gross and net return, if it’s tenanted, and if it is what kind of lease it has and the end date. It also details the proximity of all the important amenities and gives the property a “walk score” out of 100. The user can also choose to view more listings from the agency.
Agents using the site can provide a real point of difference as it generates buyer enquiries that are out of the reach of traditional marketing. Site creator Kevin Watson says this process trumps conventional websites in time-savings and buyers’ agents in cost.
Real IP training
Agents using the site can sign up to become members and complete the salesperson training. The training is simple to complete and includes written guides and videos to Real IP’s listing system and price setting tools for residential and commercial listings. Agents can also access the Real IP presentation kit to vendors and discover how to sell Real IP’s exclusive investment stocks, which only Real IP member agencies have access to.
The training was really comprehensive and it was a simple step-by-step process. It’s quite easy to maintain as well on the administration side of things,said Sutcliffe. He adds, “I would recommend this site to any agent.
Andrea Cornish is a freelance writer based in Sydney and has written for Your Investment Property, Australian Broker and Mortgage Professional Australia. Prior to turning her pen to business writing, the Canadian-born journalist jumped boxcars, trained homing pigeons and hitched a ride on a blimp – all for the sake of a good story.